RESPs-Developing a Savings Program

Investing in a Child's Future

It's never too early to start putting money aside for a child's education. Post-secondary education costs are estimated to go up drastically over the next eighteen years. Right now, a student living at home pays an average of $4,000 per school year. That amount is expected to reach $37,000 per year in less than two decades.

What Is an RESP?

Registered Education Savings Plans are set up through the Federal Government to help people save for their children's educations. By putting money away each year, you can ensure that your child will have money available for post-secondary school. A family can set up a plan in which one or more of their children are listed as beneficiaries. It's also important to note that anyone can contribute to an RESP, not just the parents of the child. Provincial Credit Union can help determine if this type of investment is right for you.

While they are not tax deductible like RRSPs, RESPs do offer some tax benefits. Interest earned on an RESP is tax-free, and when your child starts using the money for school only the accumulated interest is taxable as income.

What Is the CESG?

The biggest incentive to buy RESPs is the Canada Education Savings Grant. RESP investors receive an additional grant of 20% from the government on the first $2,000 of an annual investment. This means that the RESP can collect an extra $400 a year towards the child's education. This can mean a possible lifetime difference of up to $7,200.

The earlier you start putting money toward a child's RESP the more he or she will benefit from the annual grants and tax-free interest. And don't worry, in the event that the child listed as beneficiary does not choose to attend a post-secondary institution there are other ways to put that money to use.

Contact Provincial Credit Union if you want to learn more about RESPs.